Core Viewpoint - Kraft Heinz is facing significant challenges, including a declining portfolio and a need for strategic restructuring to return to growth, as indicated by the recent decision to pause the planned separation of its business units [4][5][21]. Financial Performance - Kraft Heinz's shares have decreased by 19% over the past year and 37% over the last five years, with annual sales volumes not increasing since a 3.4% rise in 2020, and a reported 4.1% decline in the latest results [1][5]. - The company is forecasting a further decline in organic growth of between -1.5% to -3.5% for the upcoming year, following a 3.4% drop in 2025 and a 2.1% decline in the previous 12 months [7][8]. Strategic Decisions - CEO Steve Cahillane has emphasized the priority of returning the business to profitable growth and has backtracked on the previous proposal to split the company, focusing instead on fixing the core issues [5][12]. - The planned separation of Kraft Heinz into two standalone businesses has been postponed, with the decision supported by the board, as the current market conditions are deemed unfavorable for such a split [4][21]. Investment and Growth Plans - Cahillane plans to invest $600 million into marketing, sales, and R&D to drive recovery and improve the company's performance, despite expectations of a 14-18% decrease in adjusted operating income [8][20]. - The company aims to align its brands and products with consumer preferences to enhance growth potential and improve market share, particularly in the North American Grocery segment [9][17]. Market Challenges - The external environment has become increasingly challenging, with worsening consumer sentiment and softening industry trends, complicating the path to recovery for Kraft Heinz [17][22]. - Analysts have expressed skepticism about the company's ability to operate successfully as standalone entities, indicating that the current portfolio may not be strong enough to support such a separation [18][23].

Financial Data and Key Metrics Changes - The second quarter results met expectations with an improvement in year-over-year top line performance [4] - A noncash impairment charge of $9.3 billion was recorded due to a sustained decline in stock price, affecting the carrying value of intangible assets [16][17] Business Line Data and Key Metrics Changes - In emerging markets, the top line grew approximately 8% driven by both price and volume, with the highest operating income margin ever achieved [28] - North America retail showed a decline of 2.7% in the latest four weeks, excluding cold cuts and bacon, with year-to-date performance down 4% [29] - Significant investments are being made in product renovations and marketing, particularly in key brands like mac and cheese, lunchables, and mayo [32] Market Data and Key Metrics Changes - The company is experiencing challenges in North America retail, which is seen as a gating factor for overall growth [45] - Inflation is expected to be around 5% to 7% for the year, with pricing actions being taken to mitigate impacts [52] Company Strategy and Development Direction - The company is focused on unlocking long-term shareholder value through strategic evaluations and investments in product superiority and manufacturing capabilities [4][10] - Continued investment in marketing is planned, aiming for 4.8% of net sales by the end of 2025, the highest level in nearly a decade [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and ongoing investments, emphasizing a disciplined approach to financial management [10][11] - The company is optimistic about growth in emerging markets and is committed to driving improvements in North America retail through strategic investments [28][30] Other Important Information - The company is actively expanding its brand growth system, which is expected to impact about 40% of the business by the end of the year [48] - The company is also focusing on innovation, with a goal to increase the percentage of sales from new products from 3% to a higher level [66][67] Q&A Session Summary Question: Discussion on strategic transactions and potential business separation - Management is evaluating strategic options to unlock long-term value while maintaining financial discipline [10][11] Question: Details on the sizable impairment recorded - A $9.3 billion noncash impairment charge was due to a sustained decline in stock price affecting intangible assets [16][17] Question: Pricing and promotion levels - The company is investing in pricing and marketing, with a 100 basis point increase in pricing year-over-year and an additional 30 basis points in marketing [22][24] Question: Sales trends in emerging markets - Emerging markets saw an 8% top line growth, with confidence in achieving double-digit growth rates [36][38] Question: Impact of inflation and promotions on quarterly performance - The impact of inflation and promotions pushed from Q2 to Q3 is estimated to be around 30 to 40 basis points [40][41] Question: Organic sales growth in North America Retail - The company is focused on stabilizing and improving North America retail performance through strategic investments [45][48] Question: Gross margin outlook and inflation - Inflation is expected to remain high, with a significant impact from tariffs anticipated [52][53] Question: Confidence in investment plans amid volume declines - The company maintains a disciplined approach to investments and is expanding its brand growth system to drive improvements [59][60] Question: Pace of innovation and future goals - Innovation as a percentage of sales has increased from 1.6% to 3%, with plans to continue driving this upward [66][67]